With sales greater than the GDP of some countries, Wal-Mart tops the Retail Top 100 for 2006. In second place is France's Carrefour, the most international retailer in the world. Third is Germany's Metro Group, which in 2006 experienced its strongest year of growth since 1998. Following very close behind Metro is the UK’s Tesco that has recently focused on non-food store formats and online retailing to pursue growth opportunities. The role of private equity (PE) is continuing to have a significant impact on the world of retailing. And going green, whether this is a matter of good intention, economics or public relations, is gaining importance among retailers across the globe.
Elsevier Food International, Vol. 10, Number 3, September 2007
Bryan Roberts


Before moving on to two of the key themes that have dominated the grocery retail landscape over the last year, it is worthwhile to consider the fortunes of some of the biggest retailers that dominate the ranking. It goes without saying that the retail colossus Wal-Mart continues to makes its main rivals seem almost insignificant in terms of sheer scale.


Wal-Mart is proof that even the big can get bigger, with sales greater than the GDP of some countries (for example Indonesia, Taiwan, Poland or Norway). The unrelenting American retailer ended 2006 with a world market share in excess of six per cent share of the global market, broadly equivalent to its four largest competitors put together. In the US, which accounts for the vast majority of Wal-Mart's business, the Supercenter has been the main driver of growth, with nearly 280 stores opening across the country. Internationally, the retailer continues to be busy, despite recent reversals from South Korea and Germany. Highlights from the international division in 2006/07 included the opening of the first Canadian Supercenter, the purchase of a stake in China’s Trust-Mart, an increase of its stake in Japan's Seiyu to 53.3 per cent, an increase of its stake in Central America's CARHCO to 51 per cent and the opening of 120 stores in Mexico.
Of some consolation to rivals in the US, however, will be that Wal-Mart has signalled a shift in its domestic strategy away from relentless Supercenter expansion towards driving the performance of its existing store base. This strategy has been prompted by the fact that its same-store sales performance has lagged many of its competitors such as Target, Walgreens, Costco and several of the grocery giants. Despite the slowdown, Wal-Mart’s super-efficiency and focus on price leadership will continue to heap pressure on a wide variety of retailers.

A true retail pioneer
Following Wal-Mart in second place is France's Carrefour. Sales growth in 2006 was in line with the five to ten per cent sales growth target the company had set itself for the year. With operations in more than 30 countries (including franchises), Carrefour is the most international retailer in the world. In 2006, strong operations in markets such as China, Greece, Poland, Spain, Colombia, Argentina and Indonesia helped to offset struggling business in countries such as Italy and Taiwan. The French operator – like its larger rival Wal-Mart – withdrew from the South Korean market after facing fierce competition from local players and failing to adapt its stores to the needs of local consumers. Further deals this year have seen it sell its Portuguese hypermarkets to Modelo Continente while its Dia business acquired Tengelmann’s Plus discount chain in Spain.
In number three position is Germany's Metro Group, which in 2006 experienced its strongest year of growth since 1998. Roughly half of Metro's sales are derived from non-food, while its cash & carry operation is the third largest in the world (behind Costco and Wal-Mart’s Sam’s Club) and is set to benefit from servicing the vast numbers of independent traders in emerging markets around the world for many years to come. Metro is rightly regarded as one of retail’s true pioneers and it has continued to earn its credentials through entering and investigating a number of new markets in central & eastern Europe and Asia. In 2006/07, the group's Real hypermarkets strengthened their position through acquisition in Germany (Wal-Mart's 85 hypermarkets) and central & eastern Europe (Casino's Géant chain in Poland), in addition to organic openings and market entry into Romania.
Retail Top 100 
The competitive jungle
Following very close behind Metro is the UK’s Tesco. Despite resurging competition in the UK and difficult conditions in some foreign markets, Tesco managed to increase overall sales by an impressive 11.2 per cent (in local currency) in 2006. In its main domestic market – faced with fierce regulations over grocery mergers and acquisitions – Tesco has recently focused on non-food store formats and online retailing to pursue growth opportunities. Indeed, at the time of writing, Tesco is attempting to acquire a garden centre chain in order to tap into new demographics and environmental trends. Meanwhile, the group boosted its positioning in central Europe and Malaysia through acquisitions, and an asset swap with Carrefour resulted in the withdrawal of Tesco from Taiwan in exchange for stores in the Czech Republic. All eyes are on the USA this year, where the much vaunted Fresh & Easy Neighborhood Market concept opens its doors in late 2007. The move has caused much consternation among local competitors, with Tesco’s reputation for efficiency and well-targeted merchandising preceding it.
Kroger takes fifth spot in the ranking for 2006, enjoying an ongoing resurgence in fortunes. Despite being known as America's largest conventional grocer, Kroger has recognised that simply offering groceries is no longer sufficient to compete in what CEO David Dillon refers to as the "competitive jungle". Therefore, in 2006, Kroger focused its efforts on store remodels and sub-concepts such as Marketplace, Signature and Fresh Fare. Technology, continued investment in price, improved perishables, and heavily promoted financial services - ranging from home equity loans to identity theft insurance - have helped Kroger to retain its competitive edge.

Private equity’s interest continues
A cursory glance at the Top 100 – plus a look at pretty much any financial newspaper in 2007 – will confirm that the role of private equity (PE) or other private investment vehicles is continuing to exert a significant impact on the world of retailing. Changes in Carrefour’s shareholding structure prompted a flurry of speculation regarding a possible approach from PE investors, while the UK’s Sainsbury’s has spent much of 2007 attempting to fend off approaches from firstly PE and then an investment vehicle for the Qatari royal family. Not all PE investment can be seen as an unwelcome intrusion: Ahold has been more than happy to draw a line under its experiences with its US Foodservice arm, selling it to Clayton, Dubilier & Rice and KKR in 2007, enabling to focus on its supermarket activities in the US and Europe. Other retailers thought to have been at least contemplated by PE investors include Germany’s Rewe and Australia’s Coles Group
Private equity also played a role in one retailer - Albertsons -plummeting down the rankings. The supermarket/drugstore group was put out of its misery when it was carved up between SuperValu, Cerberus Capital and drugstore operator CVS. As a result, SuperValu has bolstered its position in the US grocery market and also in terms of its global standing. Others in the Top 100 who have recently experienced a change in ownership include Canadian grocer Sobeys (taken private by its parent company); drugstore giant Alliance Boots (acquired by its Chairman and KKR); US discounter Dollar General (acquired by KKR); and Canada’s multi-format retailer Hudson’s Bay Company (picked up by a US businessman).

Going green…
Amid this feverish capitalism, it has been heartening to see the topic of environmental sustainability emerge as a theme over the last year or so. A wide variety of retailers across the globe have been striving to integrate an ecological slant into their businesses, with initiatives encompassing areas as diverse as buying, warehousing, transport, packaging, store design, product mix, recycling and shopping bags. Despite - or perhaps because of - its astounding scale and general success - world leader Wal-Mart has been especially active in this regard, with Wal-Mart stating that: "We believe that being a good steward of the environment and operating an efficient and profitable business are not mutually exclusive." Often, being environmentally friendly simply means being more efficient. Low cost retailers such as Wal-Mart and Tesco have long been striving for efficiencies in order to keep their prices down.
Whether a product of good intentions, economy or public relations, retailers are certainly becoming more environmentally friendly. For suppliers, this could have implications ranging from minor packaging changes to new product development. For example, as plastic bags become less popular, consumers may look for alternative ways to carry products (such as handles on heavy products such as pet food and laundry detergent). There are also opportunities in developing products that support the changing lifestyle of consumers, as we have seen recently with the growing popularity of local food. With food especially, consumers are becoming increasingly concerned not just about the product but with issues such as food miles, animal welfare, labour conditions and traceability. Packaging companies should expect further changes in the way they do business with retailers. Reduced or compostable packaging and smaller packs (such as concentrated detergents) are likely to continue winning space on the shelves. In many cases, Wal-Mart is correct when it says that sensible business decisions coincide with sensible environmental moves. We expect many more retailers to come round to this point of view as 2008 approaches.